In a move likely to offer some homeowners temporary housing relief, nationalized mortgage finance giants Fannie Mae and Freddie Mac announced last week that it would suspend foreclosure and eviction proceedings until January.
In a statement released by both companies, Fannie and Freddie would halt foreclosures, beginning on Nov. 26, a day before the U.S. Thanksgiving holiday, and ending on Jan. 9, 2009. This allows mortgage servicing companies and the finance companies to come up with a more streamlined process to help borrowers modify their existing loans.
The new program will be unveiled on Dec. 15, and is aimed at high-risk borrowers who have missed three or more consecutive payments, live in the affected household, and have not filed for bankruptcy. For such borrowers, the program would modify monthly payments by reducing interest, extending the maturity, or deferring principle payments.
“Until the streamlined modification program is fully implemented, we felt it was in the best interest of both borrowers and Fannie Mae to take this extra step to ensure that homeowners with the desire and ability to prevent a foreclosure have an opportunity to stay in their homes,” said Fannie Mae President and Chief Executive Officer Herb Allison.
“We encourage other servicers of non-GSE mortgages to participate in the streamlined modification program to bolster our collective efforts to stem the foreclosure crisis.”
The companies said that 16,000 borrowers are affected by this announcement.
Helping Homeowners
Fannie and Freddie, both government-sponsored enterprises (GSEs), were placed under a federal conservatorship by the Federal Housing Finance Agency on Sep. 6 after a near collapse. Days after the two GSEs were taken over, Congressional Democrats called on the companies to half mortgage foreclosures.
The two companies are an integral part of the mortgage industry by purchasing and securitizing loans. Fannie and Freddie together guarantee almost half of the nation’s $12 trillion worth of mortgages.
The announcement by the mortgage finance companies comes after major banks took initiative to temporarily freeze foreclosures for its customers, echoing previous calls by the U.S. Congress to help borrowers refinance and modify loans. Despite fewer profits, modifying loans could at least help banks recuperate a majority of their outstanding mortgages, instead of evoking foreclosure proceedings and putting homes up for sale in an already deflated market.
J.P. Morgan Chase & Co. felt that keepings its customers in their home and receiving lower monthly payments are better than nothing at all. Earlier this month the bank stopped all foreclosures for 90 days and established 24 regional loan help centers to help borrowers modify their loan payments.
Rivals Citigroup Inc. and Bank of America Corp. enacted similar measures last month aimed at lowering monthly payments. Citigroup’s plan could affect up to 100,000 customers, and Bank of America’s 400,000 customers (mostly from Countrywide Financial) could find relief.
